Pacific Bank Has Plenty Of Suitors

Sam Zuckerman, Chronicle Staff Writer

Published 4:00 am, Friday, October 9, 1998

After declaring earlier this year that it was open to a sale, San Francisco's Pacific Bank has been contacted by more than half a dozen financial institutions interested in buying it, informed sources said.

Possible bidders include Northern California banks and thrifts, as well as several financial institutions from outside the area, the sources said.

Among those that recently signed agreements giving them access to confidential Pacific financial information are Palo Alto's Greater Bay Bancorp, which had $1.5 billion in assets at the end of the June quarter, and San Francisco's First Republic Bank, which had $2.5 billion in assets at the end of the same quarter, the sources noted.

Despite the interest, sharp drops in the price of bank and thrift stocks in the past few months have made it tough for potential buyers to afford the acquisition, and it's possible no sale will take place, analysts said. Banks typically use their shares to pay for acquisitions.

Specifically, people familiar with the situation said, Greater Bay tentatively offered two shares of its stock for every share of Pacific some weeks ago. Based on a price in the high $30s for Greater Bay stock at its peak, such a deal would have been worth more than $200 million.

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Since then, Greater Bay's stock has fallen nearly 30 percent, trimming the value of the offer to less than $150 million. Sources note the preliminary offer was made before examining Pacific's books and wasn't a firm bid.

Officials of Pacific and First Republic declined comment on a possible sale of Pacific.

Pacific, which specializes in trade finance and investment management for wealthy individuals, has nearly $700 million in assets and offices in Northern California, Los Angeles, Hong Kong and the Cayman Islands.

The door to a possible sale opened in June when Pacific sold a block of 1.2 million shares belonging to Singaporean investor Cheong Swee Kheng. Cheong, whose stake amounted to more than one- third of outstanding shares, had blocked a sale since she insisted on receiving cash, while most buyers prefer to buy with stock.

Pacific officials bank said the share sale permitted it to explore several alternative strategies, including a sale. It noted that it had received offers to buy the bank and it hired the New York investment bank Keefe, Bruyette & Woods to represent it.

Since June, bank stocks as a group have plunged by 30 percent or more. Greater Bay's shares have fallen from $39 on July 29 to $24.63 yesterday. Pacific shares reached a high of $64.75 on April 20 and closed at $38 yesterday.

As bank stocks fell, Pacific hedged its bets and pursued alternatives to a sale. Last month, it announced a plan to buy back $12 million in stock, a plan that shareholders will consider at a November special meeting.

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